Stock indices finished mostly lower on Tuesday, marking a downbeat end to another record-breaking year on Wall Street.
The S&P 500 slipped from earlier gains, closing down by 0.4%. Despite this decline, the index celebrated a remarkable annual gain of 23.3%, reaching 57 record highs in 2024. This marks the second consecutive year of over 20% growth, a feat last seen in 1998.
Meanwhile, the Dow Jones Industrial Average experienced a slight dip of 0.1%, and the Nasdaq composite fell by 0.9%.
Tech stocks, particularly from major companies, were the driving force behind this year’s market surge, propelling the Nasdaq to a robust annual gain of 28.6%. In contrast, the Dow, which has less exposure to technology firms, saw an increase of 12.9% for the year.
Sam Stovall, CFRA’s chief investment strategist, noted the unexpected strength of this year’s market performance, stating it exceeded the expectations of many on Wall Street, including himself.
The U.S. market’s impressive run was primarily fueled by a growing economy, solid consumer spending, and a resilient jobs market.
Stocks in the artificial intelligence sector, such as Nvidia and Super Micro Computer, played a significant role in lifting market valuations to unprecedented levels.
Furthermore, corporate earnings showed substantial growth, with Wall Street anticipating an overall earnings rise of over 9% for S&P 500 companies, based on FactSet estimates. Final earnings reports will be analyzed once fourth-quarter figures are released in the coming weeks.
Another encouraging sign came as the economy successfully evaded a recession, despite concerns earlier in the year following the Federal Reserve’s increase of its primary interest rate to a two-decade high aimed at combating inflation.
As inflation has eased closer to the Fed’s target of 2%, this development has invigorated Wall Street, raising expectations for multiple interest rate reductions in the upcoming year, which would lower borrowing costs and spur further economic expansion.
However, after three interest rate cuts in 2024, the Fed has signaled a more cautious approach as it heads into 2025; inflation remains a concern while the nation braces for President-elect Donald Trump’s upcoming administration.
His propositions to increase tariffs on imports have sparked worries that inflation could resurge, as businesses might transfer the higher tariffs’ costs to consumers.
The year’s rally was not limited to stocks alone. Bitcoin, previously priced under $17,000 just two years ago, surged above the $100,000 mark for the first time, while gold also reached new highs with a 27.4% annual gain.
On Tuesday, around 38% of the S&P 500 stocks declined, but a downturn in technology stocks outweighed advances in other areas.
Nvidia, a leading semiconductor company whose large valuation significantly impacts the index, fell by 2.3%. Apple dropped 0.7%, while Advanced Micro Devices declined by 1.3%.
Conversely, some gains in energy stocks helped to mitigate losses, with Exxon Mobil rising by 1.7% and Chevron increasing by 1.2%.
VeriSign rose by 0.9% following revelations that Warren Buffett’s Berkshire Hathaway had increased its investment in the internet domain services company.
In summary, the S&P 500 fell by 25.31 points, ending at 5,881.63 on Tuesday. The Dow lost 29.51 points, closing at 42,544.22, and the Nasdaq dropped 175.99 points, finishing at 19,310.79.
The slight post-Christmas slump in the market does not bode well for the anticipated “Santa Claus” rally—typically characterized by stock index gains during the last five trading days of the year and the first two of the new year, often correlating with positive returns in January and throughout the year.
However, missing out on this rally has historically not been detrimental; Stovall pointed out that such instances still resulted in an average subsequent yearly gain of nearly 6%.
Bond yields showed mixed results, as the yield on the 10-year Treasury rose to 4.57% from 4.54%, while the yield on the two-year Treasury stabilized at 4.24%.
Crude oil prices also increased by 1%.
European indexes mostly ended on a positive note, while Asian markets had a mixed performance, with Tokyo and Seoul exchanges closed for New Year’s celebrations.
Markets will observe a closure on Wednesday for New Year’s Day. Investors can expect an updated report on U.S. construction spending for November on Thursday, followed by a manufacturing update for December on Friday.
Notably, both the New York Stock Exchange and Nasdaq will shut down their equity and options markets on January 9 to honor former President Jimmy Carter, a tradition on Wall Street that reflects respect for national leaders. Carter passed away at his home in Plains, Georgia, at the age of 100.
